Tustin is found in California’s Orange County, within the metropolitan area of Los Angeles. At the 2010 census, some 75,540 people were living in Tustin. It is right next to Santa Ana, the county seat. The Tustin Foothills are not actually part of Tustin itself. Tustin is a very entrepreneurial city, ranking in the top 10% for sole proprietors and startups per capita. It also has one of the shortest of Southern California’s commutes. As a result, Forbes chose it as one of the 25 best towns in the country to live well in as of 2009.
Tustin has a number of notable employers who provide a lot of the job opportunities there. The top employers are the Tustin Unified School District, Rockwell Collings, Ricoh, Costco, Safmarine, GE Power Electronics, the City of Tustin, Tustin Hospital, Toshiba, MicroVention, the Balboa Water Group, Kleen Impressions, and Warner Systems.
Tustin Commercial Buildings for Sale & Lease – Which One Should You Choose?
Because Tustin is so popular for startup businesses, there is also a huge market for commercial real estate (CRE). There are numerous opportunities for commercial buildings for sale & lease, in fact. First of all, many property investors choose to purchase CRE in order to become landlords. Others invest in commercial real estate investment trusts (REITs), meaning they can enjoy the increased property values to grow their investment, but they do not become landlords. Others still want to run businesses out of these properties, deciding to purchase them as an extra investment, or leasing them.
If you fall in the last category, which are those who want to run a business out of a CRE, choosing between purchasing a commercial property or leasing it can be highly complex. One of the reasons for this is that the financial construction of both options is complicated, which means that comparing them is about more than simply putting the monthly lease and the monthly mortgage side by side. Both have different tax advantages and disadvantages, and both have associated costs such as insurance, maintenance, and more. As a result, you must carefully consider the pros and cons of both options and how those reflect on your personal situation before you decide which one is best for you.
Tustin Commercial Property for Sale – Trends in Tustin
One place to start when comparing your options, whether you want to run a business or make an investment, is in the trends in commercial property for sale. For Tustin:
- Multifamily properties in the county usually cost around $314,841.90, which is a 0.7% rise compared to the last three months, and a year on year 10.5% rise.
- Office properties in the county usually cost around $311.66 per square foot. This is a quarterly decline of 0.2%, although a 11.3% year on year rise. If you own office space, you can usually charge a yearly rent of $20.65 per square foot in Tustin, which is a 2.1% increase over the past three months, and a 6.5% increase over the past year. Those prices are lower than the state, county, and metro area.
- Industrial properties in the county usually cost around $222.13 per square foot, which equates to a quarterly rise of 2.7% and a year on year rise of 10.9%.
- Retail properties usually cost around $408.88 per square foot, which has been unchanged over the past quarter. Year on year, however, this is a 14.5% rise. If you own retail property, you can usually charge $24.16 per year per square foot.
Tustin Commercial Property for Lease – How to Go About Getting It
In many cases, and particularly with startups, purchasing a CRE is not possible. Property prices tend to be very high, as the above statistics show, which is money small, starting businesses usually do not have. Furthermore, to obtain a CRE mortgage, you will have to make a down payment of 30%, which is capital that is then tied up rather than being invested into the business. Hence, going for a commercial property for lease is often the only viable option.
Look for a Team of Professionals to Help You Get the Best Deal
In order to lease a property, and make sure you get the best possible deal out of it, you need to build a team of professionals around you. This team should include at the very least an attorney, an accountant, and a broker. On the issue of brokers, it is important to know that the property owner is usually responsible for paying them. As a result, they will suggest highlight leasing agents to you, which are agents that prefer to work in the best interest of the owner. Instead, you should endeavor to find a tenant broker instead, who will focus on your best interests. That said, they will generally want you to sign a representation agreement, which means you may actually limit your options to a certain extent.
Your support team is there to negotiate every element of the deal you receive from the landlord. In many cases, landlords hope that people believe that the contract offered is non-negotiable. As a result, they are skewed heavily in favor of the landlord. With a lawyer, an accountant, and a broker, however, you can make sure that every point in the contract is discussed and delivered in such a way that it is actually in your favor.
There are many elements within a leasing contract that you can discuss and negotiate on, including:
- The length and extent of your personal guarantee
- How much you have to pay each month for the lease itself, and what that is based on
- The type of lease construction that is most beneficial to you (percentage lease, net lease, triple net lease, or gross lease)
- The duration of your lease and what happens when it comes to an end
- The possible rent increases, what they are linked to, and how much is the cap
- Where the responsibility for maintenance will lie
- To what extent you are able to change the inside of the building and who will carry those renovation costs
- Whether you can signpost your store on the outside of the building
- Whether you can sublease the space and, if so, under what conditions
- What types of exit clauses are in place should a need arise, such as when your business takes a downturn
- Your right to transfer your lease if you were to sell your business to a third party
- Specific clauses such as exclusive use or co-tenancy
- The amount of security deposit
Clearly, it is incredibly important to have a team of professionals around you who understand your interests, your financial capabilities, and the law itself. Lease contracts are incredibly complex arrangements, and they need to be reviewed properly. If, by contrast, you were to decide to purchase one of the commercial buildings for sale & lease, none of these issues would be of concern to you. The only limitations you may have would be how much you can change the outside of the property, particularly if you have purchased a historic or listed property. Once it is yours, you can use it, sublease it, or sell it as you see fit.
Commercial Real Estate as Investment
A CRE property is a solid investment with high returns and low risks. Regardless of the state of the economy, there will always be a need for commercial properties. And even if there is a downturn in commerce, this is usually the area that picks up the quickest again as well. If you own a property and run a business out of it, you also have the peace of mind knowing that, should your business be unsuccessful, you could lease the property and still be able to make mortgage repayments. You may even make a profit!
There is one issue to be aware of, which is true whether you lease or purchase, and that is zoning. Usually, the local government will have allocated zones to specific areas, which specify what types of businesses can run in them. For instance, it is generally not allowed to have a manufacturing plant within a shopping mall. This is something to be aware of if you hope to invest in properties in particular.
Check Out the Possibility of Investing Through a REIT
Because of the high down payment, the vast majority of people are not able to purchase CRE outright. Instead, they usually join a commercial real estate investment trust (REIT), which means their money is pooled together for the purpose of buying and selling properties at a profit. However, while this makes CRE investments far more accessible, it also means that you never truly own a property and can’t, for instance, decide to use it or sublease it. On the other hand, you also don’t have any landlord responsibilities.
Conclusion
Clearly, there are a lot of different things to take into consideration. This is not a decision to be taken lightly, and you must understand your own needs, requirements, and abilities long before you start looking. Once you know these, you have to consider the pros and cons associated with leasing, purchasing, and REIT investments. Then and only then will you be in a position to come to a decision about which option will be most beneficial to you.